In early 2002, David Cote became the newly named CEO of Honeywell International. Upon his arrival, the Board requested that David not look at the books until he became Chairman, an ominous warning of what would lie ahead. Four months later, when Cote was finally privy to the numbers, he came face to face with his new reality—aggressive and unhealthy accounting practices, a plethora of environmental issues, and a board and staff he could not trust. Instead of cowering and caving under the pressure, Cote did a fair amount of soul-searching and realized that to save the corporation, he would need to take it back to the basics.
Strategies for Success: Lessons from David Cote
“You’ve got to start with a good foundation,” Cote shared. “We had to fix our books, fix our business practices, and address the legacy issues. I started planting seeds for long-term performance and talking to our investors to get them to understand that what I was doing was going to allow us to perform in both the short- and long-term.”
Cote, who was awarded the prestigious Deming Cup for Operational Excellence from Columbia Business School in 2016, recently spoke to Dean Costis Maglaras, about Honeywell’s remarkable turnaround, an achievement well-documented in his new book, Winning Now, Winning Later, as well as his experiences leading through crises. The moderated discussion was co-sponsored by the Bernstein Center for Leadership and Ethics, The W. Edwards Deming Center for Quality, Productivity, and Competitiveness, and Leadership Lab.
For Cote, success in business meant achieving two seemingly conflicting things at the same time—winning in both the short and long term. As the leader, the trick was to figure out how to accomplish both simultaneously, and one way to do this was to set goals years in advance. “I wanted to make sure we were doing everything right in the current year in order to invest for the future,” Cote said. “It creates a different mindset if the team has to start thinking long-term in addition to just grinding it out every quarter.”
Cote’s mission-driven mentality was not the only thing that made him a successful leader. When Dean Maglaras requested advice for future business leaders, Cote offered two tips that have proved helpful in his various leadership roles: Be an independent thinker and start with the things you can control. These ideas were especially vital while Cote navigated the 2008 recession and as he continues to lead his current company, Vertiv Holdings Co., as Chairman of the Board, in the wake of the COVID-19 crisis. Cote acknowledged that while the current situation has the added complexity of public health and safety issues, a lot of the same leadership principles apply.
“First, as a leader, you can’t panic, even when things start to get tough and the media and government are panicking,” Cote said. “The second principle is the importance of independent thinking, which I’ve discovered over the course of my career is a lot rarer than being smart.” The final lessons Cote conveyed to new leaders were to always do right by the customer and don’t believe the hype that the crisis will last forever.
In his decade and a half at Honeywell, Cote also focused on the company’s environmental impact and its underfunded pension plan. After a commitment of 15 years and $3.5 billion, Honeywell resolved its legacy environmental issues, increased its energy efficiency by 70%, and improved the organization’s safety record to 80% above the industry average. “I inherited a 100-year-old chemical company with a lot of legacy liabilities and a bad strategy, but as the leader, it was not who I wanted to be, and it’s not who my employees wanted to be,” Cote said. He applied that same logic to Honeywell’s underfunded pension plan and, against investor advisement, devoted $5 billion to the plan. “My argument to the investors was that this was the best thing for the shareholder. If you’re a smart leader, you perform for the shareholder while doing the right thing for your customers, employees, and community. All are essential for the long-term.” Dean Maglaras agreed, saying, “It is the fabric on which you build a successful company.”
Cote left students with this final thought on leadership: “We all read the same books and talk to many of the same people, so recognize the trick is in the doing. Motivate your employees, pick the right direction for your company, and get everyone going in that direction. It may sound self-aggrandizing, but the fact is the role of the leader is paramount. Decide what kind of leader you’re going to be and be that leader.”
